On 18 November 2021, the House of Commons’ library issued a research briefing paper on the Critical Benchmarks (References and Administrators’ Liability) Bill.
The Bill has four clauses. Clauses 1 and 2 contain the substantive provisions. Clause 3 deals with consequential matters and clause 4 deals with interpretation, territorial extent and the Bill’s title.
Clause 1 seeks to provide more certainty for parties to contracts that contain references to a benchmark designated as “critical” (which is currently only LIBOR). It aims to allow contracts to continue operating if the FCA exercises specific powers in relation to these benchmarks. For example, if the FCA directs a change in how the benchmark is calculated, the contract should be treated as referencing the benchmark after the FCA has exercised its powers. This would not override contracts which reference a benchmark but have a fallback mechanism allowing for a different benchmark to be used in certain circumstances.
Clause 2 deals with the risk that administrators of benchmarks could face legal action as a result of complying with requirements imposed upon them by the FCA (such as the FCA instructing an administrator to change the methodology for calculating a benchmark). It grants administrators immunity from legal action when acting in accordance with FCA requirements.
The Bill was introduced in the House of Lords on 8 September 2021. The Bill passed its third reading in the Lords without division and was sent to the Commons on 2 November. No amendments were made to the Bill in the House of Lords.
Also, Parliament has published updated explanatory notes for the Bill, which were brought from the House of Lords on 3 November 2021. The explanatory notes cover issues such as LIBOR transition, the Financial Services Act 2021 and administrator protections.